Tar a directory, but don’t store full absolute paths in the archive

tar -cjf site1.tar.bz2 -C /var/www/site1 .

In the above example, tar will change to directory /var/www/site1 before doing its thing because the option -C /var/www/site1 was given.

From man tar:

OTHER OPTIONS

  -C, --directory DIR
       change to directory DIR